Pending home sales plunged 16 percent in November, a severe but not unexpected decline from October's strong levels, which were buoyed by the rush to capture an expiring tax credit for first-time home buyers.
The decline suggests that home sales won't pick up until the spring, economists say.
The pending home sales index fell from 114.3 in October to 96.0 in November, the National Association of Realtors (NAR) reported Tuesday. Nevertheless, levels were still 16 percent above where they were a year earlier, the NAR pointed out. And the tax credit has been extended and expanded to include current homeowners.
"The fact that pending home sales are comfortably above year-ago levels shows the market has gained sufficient momentum on its own," said NAR chief economist Lawrence Yun. "We expect another surge in the spring as more home buyers take advantage of affordable housing conditions before the tax credit expires.”
Pending home sales are considered a leading indicator of the housing economy because they represent real estate transactions where contracts have been signed but the deals have not yet closed.
"Sales are likely to steadily increase again as the contract-signing deadline for the new extended and expanded tax credit of [the] end [of] April approaches," wrote Paul Dales, an economist with Capital Economics, in an analysis. "That said, the prospect of a flood of bank-held properties hitting the market at some point will remain a lingering concern for some time."